Govt cancels multibillion-rand Airbus contract

The Cabinet has decided to terminate the multibillion-rand Airbus A400M strategic lift military aircraft contract, government spokesperson Themba Maseko said on Thursday.

“The termination of the contract is due to extensive cost escalation and the supplier’s failure to deliver the aircraft within the stipulated timeframes,” he told a media briefing following Wednesday’s regular Cabinet meeting.

The original cost of acquiring the eight military airlift planes was R17-billion, but going ahead with the deal would now mean paying in the region of R40-billion due to cost increases, he said.

The R2,9-billion already paid would be refunded to the National Treasury as per the contract provisions.

There would be no penalties for cancelling the contract, because of the delays in the delivery deadlines stipulated in the contract, Maseko said.

The cost escalation would have placed an unaffordable burden on the taxpayer at a time when the national fiscus was under pressure due to the economic downturn.

Maseko said the decision followed a review of the contract by the ministries of defence, finance, trade and industry, science and technology, and public enterprises.

The South African Air Force would now have to go back to the drawing board to reassess its current airlift capacity and needs.

The cancellation might affect South Africa’s peacekeeping missions in Africa, Maseko said.

He could not say at this stage how the cancellation would affect the industrial participation aspects of the deal.

Last month the Congress of South African Trade Unions (Cosatu) called for a full investigation into the deal.

At the time, Cosatu spokesperson Patrick Craven said the trade union federation was outraged at what he called “another arms-deal scandal”.

“The deal, negotiated by the Armscor parastatal in 2005, under former defence minister Terror Lekota and former public enterprises minister Alec Erwin, was for eight A400M military transport aircraft from Airbus at the already exorbitant price of R17-billion,” said Craven.

“It has now emerged that no tenders from other companies were sought, and that Armscor has failed to budget for maintenance costs over the life of the aircraft, which have now added R30-billion to the bill.”

Craven said while Airbus had called these figures, which Armscor CEO Sipho Thomo reported to Parliament, “wildly exaggerated”, the cost was still a vast amount.

“Ndivhuwo Mabaya, spokesperson for the minister of defence, cannot explain why such a huge deal was concluded without a tender process being carried out, as is the normal rule.

“Inevitably this raises suspicions of the same kind of corruption which has been alleged in relation to the earlier arms deal.”

Craven said the new government found itself sabotaged by decisions taken by its predecessor.

“There appears to have been a culture of impunity in government departments in which certain people were untouchable,” he said.—Sapa

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